Costs

June 21, 2012

I have a prediction. If the U.S. Supreme Court upholds the health care law, the same people in Congress who have tried to push down our throat the anti-patient federal med mal bill (H.R. 5) will try again. If the U.S. Supreme Court strikes down the health care law, the same people in Congress who have tried to push down our throat the anti-patient federal med mal bill (H.R. 5 ) will try again. In case that wasn’t clear: this is probably going to happen no matter what the Court does. When facts and grounds are fabricated to begin with, who needs actual rationales?

Because if anyone wanted to understand facts, they could look no further than the recent unassailable academic work examining the impact of Texas’ anti-patient 2003 medical malpractice law. This work has been done by Myungho Paik (Northwestern University - School of Law), Bernard S. Black (Northwestern University - School of Law, Northwestern University - Kellogg School of Management, and European Corporate Governance Institute), David A. Hyman (University of Illinois College of Law) and Charles SilverUniversity of Texas at Austin - School of Law). That's two Republicans, a Democrat and a foreign national, in case you’re wondering, and the study was paid for by the researchers’ universities and published in the Journal of Empirical Legal Studies.)

Today, the Austin American-Statesmanis covering one of their recent studies, which finds “no evidence that health care costs in Texas dipped after a 2003 constitutional amendment limited payouts in medical malpractice lawsuits, despite claims made to voters by some backers of tort reform.” In fact, the authors found “some evidence of increased physician spending in high-risk counties.” (High risk counties have higher claims rates.)

In addition, the authors compared “spending trends in Texas to national trends.” Author David Hyman, who worked on health policy for President George W. Bush at the Federal Trade Commission, said, “we found no evidence that Texas spending went up slower in comparison to all other states and may have had an increase.” Author Bernard Black noted, “their study suggests that Medicare payments to doctors in Texas rose 1 to 2 percent faster than the rest of the country.”

As the American-Statesmannotes, this is all very consistent with other reports, like the one from Public Citizen late last year. And see the Center for Justice & Democracy’s fact sheet summarizing the authors’ other recent mythbusting study about Texas physician supply – or rather lack it –since caps were enacted.

The researchers assumed that doctors who faced a higher risk of being sued — those in counties that had larger numbers of malpractice cases — would perform more tests and procedures than necessary to protect themselves from lawsuits. With tort reform, which limited damage awards against doctors, the need to practice such “defensive medicine” would decline, the argument goes.

But in comparing Texas counties in which doctors faced a higher risk of lawsuits with counties where the risk was lower, the researchers found no difference in Medicare spending after tort reform and indications that doctors in higher- risk counties did slightly more procedures.

“If tort reform reduces spending, it would have the biggest effect on high-risk counties,” Silver said. He noted that those tend to be large and urban.

"This is not a result we expected," said Bernard Black, a co-author and a professor at Northwestern University's Law School and Kellogg School of Management.

However, the findings were no surprise to experts like Tom Baker, Deputy Dean and William Maul Measey Professor of Law and Health Sciences at University of Pennsylvania Law School, who noted, “This is a very highly regarded study, and this team is highly regarded. Their results didn’t surprise me at all."

On the other hand, Rick Perry disagrees. What more support do you need?

March 09, 2012

Hey, Congressional Budget Office! Yeah you, the ones who came up with a supposed federal budget savings of 0.5% if Congress enacted all of the most Draconian, cruel restrictions on the rights of patients that exist in this country (first reported in a letter to Senator Hatch and critiqued here.) Remember how you found 0.2% savings because, you say, medical malpractice premiums would drop, and 0.3% savings because doctors would stop practicing “defensive medicine”?

Sit back, because we have a great Double Feature for you, starring actual facts and experience instead of secret econometric models, which prove that your percentages – tiny as they are – are still vastly overstated.

Once upon a time in California (1975, to be exact) a little law by the name of “MICRA” was enacted. Among other things, this law placed a $250,000 cap on non-economic damages for malpractice victims (just like CBO’s model bill!). As a result of the cap, California’s medical malpractice insurance industry became so bloated that “as little as 2 or 3 percent of premiums are used to pay claims” and “the state’s biggest medical malpractice insurer, Napa-based The Doctors Company, spent only 10 percent of the $179 million collected in premiums on claims in 2009.” This alarmed Insurance Commissioner Dave Jones, who said that “insurers should reduce rates paid by doctors, surgeons, clinics and health providers while his staff scrutinizes the numbers.” And they did, and they found that indeed, rates were excessive. And guess what Commissioner Jones did then? He used his powers granted to him by the Good Witch of the …, I mean California’s insurance regulation law, Prop, 103, and ordered rate reductions, “saving doctors, dentists and other medical providers nearly $19 Million annually in premiums.”! Fat lotta good that cap ever did, am I right? Said Jones,

These medical malpractice rate reductions also demonstrate, once again, the important role that Proposition 103, which authorizes the Insurance Commissioner to reject excessive rate hikes for property and casualty insurance including medical malpractice insurance, has played in reining in medical malpractice rates since its passage in 1988.

Now for Feature #2. This one’s called, “The CBO Way-Overexaggerates Savings from Defensive Medicine.” OK not too imaginative, and we’ve seen many variations of this title before. But the latest comes from the Center for Progressive Reform, which refutes CBO’s claim that “'defensive medicine’ is a reason for increasing health care costs.” Here is some of what CPR says:

What is perhaps most striking about the CBO letter, though, is the rare departure from years of careful analysis. The CBO’s past work found small savings from civil justice restrictions and declared the evidence on “defensive medicine” to be “weak or inconclusive” and “at best ambiguous.” Another CBO report, in 2004, described the limits of Kessler and McClellan’s 1996 Medicare research by concluding, “those studies were conducted on a restricted sample of patients, whose treatment and behavior cannot be generalized to the population as a whole.” In fact, just ten months before its letter to Senator Hatch, the CBO concluded that there is insufficient evidence that civil justice restrictions would reduce health care costs. The past work speaks for itself. Little changed in the research on defensive medicine in the years between CBO’s prior analyses and its letter to Senator Hatch.

January 27, 2012

Have you ever thought what might be an appropriate tag line for the so-called “tort reform” movement? How about, “We Take Money from the Sick and Injured and Give it to Insurance Companies,” or maybe, “We Make Taxpayers Pay for What Corporations Do Wrong,” or how about, “We Tell Local Judges and Juries What To Do!” I have another suggestion. It’s based on that famous definition of insanity: “We Do The Same Thing Over And Over And Expect Different Results.”

Like for example, take the McDonald’s coffee case portrayed in the award-winning film Hot Coffee, which we wrote about most recently here. Some “tort reform” folks keep trying to re-argue it, presenting a case that the jury didn’t believe, a case that the judge and jury both rejected, and which led the judge, in refusing to grant a new trial in the case, to call McDonald's behavior “callous.” (Like here, here.) Soon I expect to start hearing them say the hospital pictures of Stella Liebeck’s third degree burns and skin grafts were photoshopped. (As the film also notes, McDonald’s was selling coffee as hot as a car radiator. That’s right, a car radiator. And by the way, the coffee being sold was as hot as a car radiator. And also by the way, if you're over the age of 25, you may recall how flimsy those McDonald’s cups used to be. You could stick a finger right through them and if the coffee was too hot, the cup could collapse in your lap. Which is what happened to Stella.)

So now let’s move on to another insanity this week. The insurance consulting firm Towers Watson is issuing, once again, their pretend “cost of the tort system” report. They have tried this 15 times already. We’re convinced that one day, they must truly believe that one of their reports will actually reflect “the costs of the tort system.” Not yet though.

One of Towers Watson’s favorite things is to speculate based on nothing. Expect “significant increases” in tort costs next year, they say. Last year, it predicted this increase based on rubbish like the likelihood of future inflation and President Obama’s federal judicial appointments, none of which came to pass. Their own figures decreased. You'd think that would be embarrassing enough to keep them from making more bogus predictions but it hasn't. They're doing it again.

No matter that the company itself admits that its figures have nothing to do with the costs of the legal system like jury verdicts, settlements, lawyers’ fees or any actual costs of what might generally be considered the “tort” system, or that it examines only insurance losses whether or not a lawsuit was even filed, (think “fender bender”) plus insurers’ “guess” (historically, widely overstated) of what future losses could be, plus all of the industry’s bloated overhead (salaries, bonuses, lobbying costs, jet planes etc.). Plus, they cite themselves for much of the data, and don't disclose them.

So in order to find any kind of “increase” this year (since actually the costs were down even by their own definition), they were forced to include predictions about the costs of the 2010 BP oil disaster - even though the court trial hasn’t even started. Even the Gulf Coast Claims Facility has paid only about $6 billion of the $20 billion BP promised to pay victims. And this is what’s giving rise to an 5.1% increase in the cost of the entire U.S. tort system? Just so Towers Watson can then scare Americans into believing they are somehow paying for this? Wow, that is some good news for BP!

The April 2010 Deepwater Horizon drilling rig explosion and resulting oil spill in the Gulf of Mexico were the key drivers in the 5.1% increase in U.S. tort costs in 2010, according to the 2011 Update on U.S. Tort Cost Trends from global professional services company Towers Watson (NYSE, NASDAQ: TW). Absent the costs from that event, tort costs would have shown an overall decrease of 2.4% for the year, the findings indicated.

In total, the U.S. tort system cost $264.6 billion, which translates to $857 per person, versus $820 per person in 2009. Personal tort costs totaled $96.7 billion; commercial tort costs were $168 billion. The 2011 report analyzes U.S. tort costs from 1950 through 2010, with projections through 2013.

January 13, 2011

Funny story. Years ago, an insurance consulting firm found itself a little niche –making up numbers about “tort system” costs, exaggerating them beyond all reason, and hyping them to create fear among public officials so everyone’s legal rights were cut. No criticism, no matter how clear and repetitive, has ever deterred this company from issuing the same garbage, year after year.

That insurance consulting firm is now called Towers Watson and recently, it issued its latest refuse of a report, alleging that the U.S. tort system cost $248.1 billion in 2009. That, by the way, is a 2.7 percent drop from last year. In fact over the last 19 years - 1991 to 2009 – their own highly-exaggerated figures show tort costs grew at only 3.3 percent per year, which is less than the GDP (4.6 percent). But you won’t see that emphasized anywhere.

To get a sense of the criticisms, see last year’s report from Americans for Insurance Reform, which we covered here.

One of Towers Watson’s favorite things is to speculate based on nothing. Expect “significant increases” in tort costs next year, they say. Last year, it predicted this increase based on rubbish like the likelihood of future inflation and President Obama’s federal judicial appointments, none of which came to pass. Their own figures decreased. You'd think that would be embarrasing enough to keep them from making more bogus predictions but it hasn't. They're doing it again.

No matter that the company itself admits that its figures have nothing to do with the costs of the legal system like jury verdicts, settlements, lawyers’ fees or any actual costs of what might generally be considered the “tort” system, or that it examines only insurance losses whether or not a lawsuit was even filed, (think “fender bender”) plus insurers’ “guess” (historically, widely overstated) of what future losses could be, plus all of the industry’s bloated overhead (salaries, bonuses, lobbying costs, jet planes etc.). Plus, they cite themselves for much of the data, and don't disclose them.

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